Terms

Question 1

Secured Bonds

Answer 1

Secured by collateral

Question 2

Mortgage Bond

Answer 2

Type of secured Bond that is secured by a mortgage on a real property. Largest type of Secured.

Question 3

Closed -end Mortgage Bond

Answer 3

The property cn be used as collateral to secure other future loans unless those loans are lesser in claim

Question 4

Open-end Mortgage Bond

Answer 4

The property can be used to secure future loans and all debt hold equal claim. Creates more risk and higher yld

Question 5

General Mortgage Bond

Answer 5

Pledges all mortgagee prop of a corp as collateral but dn name any specific lots

Question 6

Accretion

Answer 6

The amount of implied interest which has accum on a BOND PURCH AT A DISCOUNT (zero coupon)

Question 7

Refunding Bonds

Answer 7

Sale of new bonds, which are used to retire outstanding issues. Done when there is a sharp decline in interest rates, they take advantage of bonds at a lower interest rate

Question 8

Planned Amortization Class (PAC)

Answer 8

CMOs that most resembles bonds because they have a sinking fund feature which gives investors stable CF. top of the cap stack in the PAC funds.
LESS AVERAGE EXPOSURE TO CALL RISK

Question 9

Z-BOND

Answer 9

Final tranche of a CMO, also called accretion bonds. b/c they dn get paid until all the other tranches are paid off

Question 10

Agency CMO

Answer 10

Guaranteed or guaranteed and issues by Fannie Mar, Fredddie Mac and Ginnie Mae

Question 11

Private CMO

Answer 11

Issued by banks, invest banks, home builders. Are not backed by government guarantee

Question 12

Collateralize Debt Obligations

Answer 12

Structured debt based off a pool of assets. (mortgages, car loans, corp debt, CC debit)

Question 13

T-Bill

Answer 13

DN carry a fixed rate of interest, unlike T notes and T bonds

Question 14

T Bonds

Answer 14

Only on that is callable (bills and notes are not)

Question 15

Regular way fro US Gov Securities

Answer 15

T+1

Question 16

Ginnie Mae

Answer 16

Securities are Guaranteed by Fed Gov ( remember 3 Gs)

Freddie and Fannie are obligated as a agency not the FG

Question 17

Alternative Minimum Tax

Answer 17

For individuals, the AMT is computed by adding tax preference (no taxed) items to taxable income. EX: private activity municipal bonds.

Question 18

Funded Corporate Debt

Answer 18

Corporate funded debt is referred to as corporate debt with one or more years to maturity.

Question 19

Refund Bond

Answer 19

A refund is a new bond issue that is used to retire an existing bond issue.

The capitalization of the corporation would remain unchanged because the amount of the debt would remain unchanged. Issued when: substantial drop in interest rated to reduce interest costs